Vatican City, Jan 3, 2011 / 02:01 pm (CNA/EWTN News).

http://www.catholicnewsagency.com/news/new-vatican-agency-to-combat-money-laundering-terror-financing/

Pope Benedict XVI has created a new oversight agency and approved tough new measures aimed at ensuring that the Vatican’s bank and other institutions cannot be exploited by those seeking to launder money or finance terrorist activity.

The measures announced on Dec. 30 establish harsh penalties, including jail time and fines, for Holy See employees and others having financial dealings with the Vatican if they are found engaging in financial misdeeds such as unlawful transactions, fraud or counterfeiting. The measures also outline penalties for activities such as illegal arms distribution, drug dealing, and even environmental pollution.

The newly created Financial Information Authority will police the financial and commercial dealings of all Vatican agencies, including the Vatican Bank.

The authority’s president and the governing council will be appointed by the Pope to serve a five year term and will make an annual report to the Vatican’s Secretary of State. Criminal investigations and any penalties would be carried out by Vatican City State officials in cooperation with Italian authorities.

In an apostolic letter announcing the new laws, the Pope said the new authority would help combat the "Inappropriate use of the market and the economy" and the "terrible destruction of terrorist violence." The new controls and monitoring will enable the Vatican to ensure that donations or investments by the Church are not rerouted to support terrorist activity, a prospect officials are obviously eager to avoid.

The new laws will go into effect April 1.

The timing of these new provisions is not incidental. Investigations in 2010 turned up the heat on the Vatican to raise the bar on its financial practices to meet international standards.

Last June, Cardinal Crescenzio Sepe of Naples, was accused of giving a cut-rate real estate deal to an

Italian politician who, in turn, approved state funds for the Church.

The former head of the Vatican's Congregation for the Evangelization of Peoples denied the accusations, saying he acted with "maximum transparency."

The Vatican's "bank," the Institute of Religious Works, is currently under investigation by Italian authorities who froze 23 million Euros (more than 30 million U.S. dollars) last September, citing suspicion of money laundering.

The Institute's president, Ettore Gotti Tedeschi, has consistently denied any misdealings and blames the situation on a "misunderstanding."

In October, the Italian court denied an appeal attempt and has not yet freed up the sum due to the ongoing investigation. The prosecutor's office later stated that although the Vatican had expressed a will to adopt international standards, there was "no sign" that it was going to do so.

Tedeschi has made no secret of his wish to bring the Vatican up to European Union standards against money laundering. His aim is to have the Vatican accepted for inclusion on Europe's  "White List" for anti-money laundering compliant states.

The Pope's new measure represents a major move in that direction. The Financial Information Authority will be working in open association with European agencies.

Vatican spokesperson Father Federico Lombardi hailed the stiffer measures as in a Dec. 30 statement.

They "cannot but be of benefit to the Church," he said. "Vatican organizations will be less vulnerable in the face of the continuous risks that inevitably arise in the handling of money."

Previous errors that caused scandal "will be avoided," said Fr. Lombardi. The result, he explained, is that "the Church will be more 'credible' before the members of the international community, and this is of vital importance for her evangelical mission."

In a parallel statement, the Holy See's Secretariat of State called the new measures part of "efforts to build a just and honest social order.

"At no time," the statement reads, "may the great principles of social ethics like transparency, honesty and responsibility be neglected or weakened."